February 18, 2008

World cereal production to increase but prices to remain high

Early prospects point to the possibility of a significant increase in world cereal production in 2008, but international prices of most cereals remain at record high levels and some are still on the increase, according to the UN Food and Agriculture Organization (FAO).

The forecast increase in production follows expansion of winter grain plantings and good weather among major producers in Europe and in the US, with satisfactory outlook in other places, FAO's latest Crop Prospects and Food Situation report said.

Dwindling stocks is keeping upward pressure on international grain prices, despite a record world harvest last season, with international wheat prices in January 2008 83 percent higher from a year earlier, the FAO noted.

Although prices are high, total world trade in cereals is expected to peak in 2007-2008, driven in great part by a sharp rise in demand for coarse grains, especially for feed use in the EU, according the report.

Cereal imports for all Low-Income Food-Deficit countries in 2007-2008 are forecast to decline by about 2 percent in volume, but their cereal import bill is projected to rise by 35 percent for the second consecutive year.